SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16956 \ April 10, 2001
SECURITIES AND EXCHANGE COMMISSION v. MATTHEW JOEL MESPLOU, United States District Court for the Northern District of California, Civil Action No. C 01-1243 VRW
SEC Charges Insider Trading In Merger Of Cobalt Networks And Sun Microsystems Inc.
The Securities and Exchange Commission today announced that it has sued an experienced investor from Palo Alto for insider trading prior to the merger last September between Cobalt Networks, Inc. and Sun Microsystems Inc. The Commission's action alleges that Joel Mesplou, whose primary occupation is investing in securities for his own account, made $411,696.67 in illegal profits by trading in Cobalt securities in advance of the merger based on information he acquired from an attorney representing Cobalt. In a related action, the United States Attorney's Office for the Northern District of California announced today that they charged Mesplou with lying to the Commission during its investigation of this case.
Simultaneous with the filing of the Commission's civil complaint, Mesplou consented, without admitting or denying the allegations in the Commission's complaint, to the entry of a permanent injunction and payment of a civil penalty of $286,634.42. In the criminal action, Mesplou pleaded guilty to a criminal charge that he made false statements to the Commission when, during its investigation, investigators asked Mesplou about his trading in Cobalt. In the criminal action, Mesplou agreed to pay a civil forfeiture of $536,758.92.
According to the Commission's complaint, on September 17, 2000, Mesplou learned from an attorney representing Cobalt that Cobalt would soon be acquired by Sun. The following day, Mesplou spent nearly $1.2 million buying stock and options contracts. On September 19, before the opening of the markets, Sun announced that it would acquire Cobalt. That day, Cobalt stock closed at $57.1875, nearly 28% higher than its previous day close. The day of the announcement, Mesplou sold all his securities for a total profit of $411,696.67.
The Commission action charged Mesplou with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission acknowledges the assistance in this matter of the National Association of Securities Dealers Regulation, Inc., the Chicago Board Options Exchange, the United States Attorney's Office for the Northern District of California, and the Federal Bureau of Investigation.